Ethanol Policy Divides Latin America

Ethanol Policy Divides Latin America

Article excerpt

Venezuelan President Hugo Chavez calls the boom in ethanol the
equivalent of starving the poor "to feed automobiles."

Ethanol, which is derived from crops such as corn or sugar, is
seen by some as a green alternative, a rising star on the path
toward reducing independence on foreign petroleum. But it's not just
Mr. Chavez who is questioning whether the benefits outweigh the
unintended consequences.

Now poultry industry executives, who have seen the price of
feedstock has gone up; Mexican consumers, facing a 60 percent jump
in the cost of tortillas; and even environmentalists, who look at
the amount of fertilizer that will be needed to grow extra crops,
are wondering aloud whether ethanol will help or hurt Latin American
economies.

The South American energy summit that concluded in Venezeula this
week provided the latest platform for critics. Even though the
debate has been cast as another issue in the long line of
ideological battles aligning Chavez and Cuban leader Fidel Castro
against the US, some analysts say that their point is larger than
political: If the price for staple food items rises across the globe
because of demand, Latin America will be one of the hardest hit
regions.

"I think people worry that rich Americans are trying to fuel cars
at the expense of hungry people in poorer countries," says Janet
Larsen, director of research at the Earth Policy Institute in
Washington. "This increased push for ethanol production could be an
incredible foreign policy blunder."

What we are seeing now, she says, is the beginning of a very long
debate. Chavez's comments came shortly after harsh op-eds penned by
Mr. Castro who, in his first public statements since falling ill
last July, resurfaced to call the US proposal "genocidal."

His words follow mass protests in Mexico, after the price of corn
tortillas shot up in January.The South American Energy Summit at
Margarita Island was the first meeting between Brazil's President
Luiz Inacio Lula da Silva since Chavez lambasted the plan after Mr.
Bush visited Brazil last month, when Bush and Lula signed a proposal
to promote the industry in the region.

For this meeting, Chavez nuanced his position - saying he is not
against ethanol production but against the US plan to use corn to
produce it.

"We're not against biofuels," he said. "They are viable
alternatives, as long as they don't negatively affect the lives of
the inhabitants of the region."

For many analysts, it seemed a retraction of his earlier position
that is likely to reduce friction - and ensuing divisions - with
Brazil, says Rafael Quiros Corradi, an analyst in Caracas.